Aecon Group Inc is a construction and infrastructure development company based in Canada. The company offers a wide range of integrated services including project finance, design, construction, materials supply, engineering, procurement and manufacturing.
Aecon operates through a diversified structure (more than 30% of EBITDA) and an attractive concession portfolio (almost 70%). The construction business includes industry (24% of TTM revenue), utilities (17%), nuclear (11%), heavy civil (14%), urban transport systems (18%), and roads and highways (16%). The concession portfolio includes investments in attractive projects.
For more than a century, Aecon has been an integral part of Canada’s infrastructural success story, building hundreds of factories, roads, sewer systems, power plants, mines, offices, hotels, casinos, etc. across the country. The company has offices in Canada, the United States and internationally.
DISCLOSURE: Please note that links to merchants mentioned in this post may use an affiliate link. Using an affiliate link means that I may earn a commission at no cost to you whenever you purchase anything through that affiliate link.
Sales growth & market presence
As Canada’s leading infrastructure company, Aecon has built strong industry relationships and a solid reputation for quality and on-time delivery of projects. The company’s project pipeline includes federal and key provincial infrastructure programs, as well as other projects diversified by geography, sector, contract size and type. Aecon has developed a strategy for building strong alliances, including joint agreements and public-private partnerships, and remains well-positioned to capitalize on emerging growth in key sectors.
Given Aecon’s ability to provide a wide range of construction, contract and infrastructure development services, the company has become a one-stop-shop for its customers looking for integrated solutions.
The company’s presence along the entire value chain, from clearing the site to the finished building, gives it a competitive advantage. Revenue in the final quarter continued to be impacted by COVID-19, particularly in certain end-market sectors. However, in the construction segment, the company saw overall growth driven by higher nuclear and utilities sales, which were partially offset by lower sales in urban transportation systems as well as civil and industrial sectors.
New contract awards were booked for just $ 213 million in the first quarter of 2021, compared to $ 912 million in the same period in 2020. The company ended the quarter with a pipeline of $ 5.9 billion compared to 6 . $ 9 billion in the same period last year. Aecon’s sales have increased 9% CAGR over the past three years.
Aecon can be credited with successfully delivering some of the most complex projects including the Bermuda International Airport, the Eglinton Crosstown LRT, the Darlington Nuclear Refurbishment in Ontario and many more. The company also sees the US infrastructure and construction market as a strategic opportunity for earnings stability and growth.
Because of its scale, diversification and performance to date, Aecon has become a preferred partner on large projects across Canada. Significant infrastructure investment opportunities across Canada and a strong pipeline are providing a strong tailwind for the company. The trend in government investment across Canada as well as the private sector is expected to continue.
Aecon is a Canadian dividend aristocrat who provides sustainable dividend growth to its shareholders. Most recently, the company increased its quarterly dividend by more than 9%. Aecon has increased its annual dividend growth to an impressive 12.3% over the past decade. The company has an average annual return of 3.8% and a reasonable payout ratio of currently 66%. It has paid $ 160 million in dividends over the past five years.
Over the years, this industry has built a solid, diversified, and resilient business model. It has developed extensively in its core markets and achieved significant geographic and market diversity. The company is highly diversified across various construction sectors and has a strong recurring income base that further stabilizes cash flow.
The company also has no maturities until the second half of 2023. Aecon’s rich experience in various segments and regions enables it to participate in multidisciplinary projects. The positive trend in infrastructure investments in civil infrastructure, urban transportation systems, nuclear power and utilities by the Canadian government and private actors is a strong tailwind for the company.
Recurring revenue in the utility sector is expected to increase due to major customers’ investment plans in telecommunications and energy-related works.
Aecon is in a good position to benefit from an active supply pipeline of over $ 40 billion and a long-term, high-margin backlog. A strong and liquid balance sheet also supports growth. Global know-how, solid infrastructure development and a strong Aecon order backlog to achieve better EBITDA margin growth.
Government investments in infrastructure should also act as an economic stimulus as part of the COVID-19 recovery plans.
The company operates in highly competitive markets with large contractors, medium-sized and smaller companies. The company also faces intense competition from foreign companies trying to enter the Canadian market. Aecon competes with companies like SNC-Lavalin, the top-selling Canadian engineering and construction company.
It also competes with WSP Global, Stantec Inc, Dirtt Environmental Solutions, etc. Stantec is a leading global design company with a presence in architecture, the environment, community development and energy. Aecon’s integrated platform offers an operational advantage over its competitors.
The company is a key player in Canada’s infrastructure development history with more than 100 years of solid experience and extensive construction expertise. The company benefits from recurring and diversified sources of income in various construction sectors and an attractive concession portfolio.
As Canada’s leading infrastructure company, Aecon is well positioned to benefit from growing infrastructure spending in Canada and strong bidding activity in the near future. The company maintains a positive outlook for 2021 supported by a strong backlog, recurring revenue programs, and pipeline of posting opportunities for new work.
Despite this generally positive outlook, the COVID-19 pandemic is expected to continue to have some impact on Aecon’s businesses, particularly the aviation and construction sectors.
My portfolio has generated over 12% annual returns since 2009. It’s not since the beginning of the year or 2019 it’s from 2009 !!! That’s a constant return, which means that, following the rule of 72, I double my portfolio every 6 years.
My approach is simple, but you need key data that I cultivated using the Dividend Snapshot Screeners. No other investment services provide you with easily understandable data, but also actionable data. No hidden magic.
In fact, I’ve tried all of the investment services for dividend investors like an investment services crash test dummy. Just ask me and you will find out why I couldn’t use anything out there and that’s how the Dividend Snapshot Screeners were born!